If you live in anywhere prone to flooding, your standard homeowner’s policy may not be enough. But do you need flood insurance? Whether your goal is to protect your business, your home or both, here are some facts to help you make a smart decision.
National Flood Insurance Program (NFIP)—Created by Congress in 1968, NFIP stepped in to cover a gap in the marketplace (standard homeowners’ insurance policies do not cover flood damage). Property owners today purchase NFIP flood insurance policies separately through insurance agents. Flood insurance comes in two flavors: commercial and residential
Commercial Policies—Covered: Per the NFIP, commercial policies cover structural damage to the exterior and foundation, as well as damage to certain indoor items, such as heating and cooling systems, appliances, carpeting, any personal items in the building, and debris removal.
Commercial—Not Covered: Damage caused by moisture or mold, property outside of an insured building (landscaping, septic systems, pools, and decks, for example) and any financial losses incurred as a result of business interruption.
Residential Policies—Covered: Residential property flood insurance covers personal items, like food and clothing, and building property including central air conditioning equipment and furnaces.
Residential Policies—Not Covered: Any expenses incurred while living in temporary housing are not included in residential flood insurance coverage. Cars and their parts as well as belongings outside of the building (landscape and patios, for example) are also not covered under residential policies.
Moreover, coverage of damage to basements and crawl spaces, as well as items stored within them, is typically limited for both residential and commercial properties.
“For many homeowners, flood insurance isn’t an option — it’s a required condition for their mortgage,” said Steve Mostyn, founder of Mostyn Law, a Houston-based law firm that specializes in insurance litigation. “However, if you’re not obligated to carry it, homeowners should still evaluate their risk versus their need. Even a minimal amount of flooding can have serious financial consequences.”
Overall, flood insurance helps reduce your risk but no policy will cover all potential damage. If you live in a potential flood zone, you should carefully investigate whether a policy makes sense for you. The best place to start is to locate an insurance agent near you.